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When it comes to portfolio allocation strategies, foreign
investments are certainly one of the main go-tos as investors
look to various corners of the market for more lucrative
opportunities. Adding exposure to equities from around the
globe not only provides great diversification benefits, it also
has the potential to produce uncorrelated returns that
may be more appealing than domestic investments
[see 101 ETF Lessons Every Financial Advisor Should
Learn].

And while there are dozens of ways to gain international
exposure, one question in particular that stumps many investors
is which approach to take; some choose to cast a wider net over
the space with a broad-based ETFs, while others may wish to
take advantage of the targeted exposure offered through
country-specific funds.

How the ASEAN 40 ETF Stacks Up Against Country-Specific
Funds

One particular fund that lends itself perfectly to answering the
age old question of broad-based versus country-specific exposure
is the FTSE ASEAN 40 Index ETF (ASEA,
B+). This fund offers exposure to the
largest companies in the original five
ASEAN countries: Indonesia, Philippines, Singapore, Malaysia and Thailand.

But while the ASEAN members share some similarities in terms
of geography and demographics, they are far
from identical – especially when looking at the level of
economic development. The chart below illustrates the
differences between risk/return profiles among the biggest ASEAN
country-specific ETFs and the broad-based FTSE ASEAN 40 Index ETF
(ASEA,
B+) [see Asia-Centric ETFdb Portfolio].

Note that the risk/return profile is defined by a fund’s 200-day
volatility and trailing one-year return, while the respective
annual dividend yield of each ETF is represented by the
size of each bubble [see 3 Things You Need To Know When Picking A Country
ETF]:

It is important to note that the chart above is based on trailing
returns, and as such, its compositions is subject to changes over
time. While there is no universally right choice from the above
ETFs, it is important for investors to take a close look under
the hood of these products to determine which combination of risk
and return is appropriate. For example, the broad-based ASEA has
a relatively low volatility (though not the lowest of
the list) and has provided meaningful returns and yields over the
trailing one-year period. In contrast, the highly volatile
Philippines ETF (EPHE) would be more appropriate for someone who
is willing to take on more risk to capture higher return
potentials.